What compensation could you receive with a successful constructive dismissal claim?

Constructive dismissal happens when an employer seriously breaches an employee’s contract and the employee resigns in response. Although the employee resigns, the law treats it as a dismissal, and the employee can bring a claim for constructive unfair dismissal in the employment tribunal. This article explains what compensation a successful claim can bring and what employers can do to reduce the risk of a claim.

What counts as a serious breach of contract?

The breach must be fundamental, meaning it goes to the root of the employment relationship. Examples can include:

• discrimination or harassment
• bullying, or failing to deal with it
• failing to pay wages, or repeatedly paying late without good reason
• ignoring or failing to investigate a genuine grievance
• changing hours, pay or place of work without agreement and without a contractual right to do so

Many claims rely on a breach of the implied duty of mutual trust and confidence, which can come from a single serious incident or a series of incidents ending in a final straw.

The employee must resign because of the breach and should not delay too long, or they risk being treated as having accepted it. Until 1 January 2027, employees usually need two years’ service to claim unfair dismissal, including constructive unfair dismissal. From that date the qualifying period falls to six months.

How is compensation calculated?

Compensation for constructive unfair dismissal is worked out in the same way as for any other unfair dismissal, in two parts: a basic award and a compensatory award.

The basic award

The basic award depends on age, length of service (up to 20 years) and gross weekly pay:

• half a week’s pay for each complete year of service below the age of 22
• one week’s pay for each complete year of service between the ages of 22 and 40
• one and a half weeks’ pay for each complete year of service at age 41 or over

Weekly pay is capped. From 6 April 2026 the cap is £751, so the maximum basic award is £22,530. The calculation is the same as for statutory redundancy pay.

The compensatory award

The compensatory award is paid on top of the basic award and is intended to make up for the financial loss caused by the dismissal. It can include:

• loss of earnings from the date of dismissal to the tribunal hearing
• future loss of earnings until the employee is likely to find comparable work
• the value of lost benefits, such as pension contributions, a company car or health insurance
• a modest sum for loss of statutory rights, reflecting the need to build up service again with a new employer

The employee must take reasonable steps to find new work, and earnings from a new job are deducted from their losses.

Is there a cap on compensation?

Yes, for now. From 6 April 2026 the compensatory award is capped at £123,543 or 52 weeks’ gross pay, whichever is lower. Under the Employment Rights Act 2025, the statutory cap on unfair dismissal compensation is due to be removed from 1 January 2027.

Some claims are already uncapped. Where a dismissal is linked to whistleblowing or discrimination, compensation is not capped, and in discrimination claims the tribunal can also award compensation for injury to feelings.

Can compensation be increased or reduced?

The tribunal can increase or reduce the compensatory award by up to 25% if either side has unreasonably failed to follow the Acas Code of Practice on disciplinary and grievance procedures, for example where an employer ignores a formal grievance or an employee resigns without raising one.

Compensation can also be reduced where the employee’s own conduct contributed to what happened, or where they have not done enough to find new work.

Many claims settle before a hearing, often through Acas early conciliation or a settlement agreement. Employees must normally contact Acas before making a claim, and for most claims the time limit for an employment tribunal claim is now six months.

How employers can reduce the risk of a claim

• Know what your employment contracts say, and do not change terms without agreement or a clear contractual right.
• Keep policies up to date and apply them consistently.
• Deal with grievances promptly and fairly, following the Acas Code.
• Take complaints of bullying, harassment and discrimination seriously.
• Pay wages correctly and on time.

Our article on common mistakes employers make in disciplinary proceedings covers other pitfalls that can lead to claims, and our employment law advice for employers can help you take the right steps before making significant changes.

Whether you are an employee thinking about resigning or an employer facing a claim, book a free 30-minute consultation with our employment solicitors or call 0141 471 9166.